Municipalities losing thousands in unpaid taxes

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This article was published 30/11/2022 (1011 days ago), so information in it may no longer be current.

Westman municipalities are calling on the provincial government to supply tools to recover property taxes that have gone unpaid by oil and gas companies.

The unpaid bills can add up to hundreds of thousands of dollars and other ratepayers are on the hook when oil and gas companies that have halted production, gone into receivership or been seized don’t pay on properties such as well sites, said Rural Municipality of Wallace–Woodworth Reeve Clayton Canart.

“We need some way as municipalities to protect us from that because it can be significant amounts of money,” Canart told the Sun.

Unlike other property owners who may own a house, for example, Canart said municipalities don’t have the option of putting oil and gas property up for sale to recuperate taxes as the companies lease sites from landowners. Additionally, in cases where a company has gone bankrupt the municipality isn’t on the list of creditors to receive funds.

“We really have no mechanism to recuperate those funds,” Canart said.

Meanwhile, the municipality has set its budget based on taxes owed and school taxes it has collected and submitted on behalf of the province.

“If [property taxes] never get paid then we end up, the rest of the tax payers, the ratepayers, end up having to make up that difference because you have to pay the bills,” Canart said.

At the annual Association of Manitoba Municipalities convention last week, members passed a resolution, Spearheaded by Wallace–Woodworth, to lobby the provincial government — specifically the departments of Municipal Relations as well as Natural Resources and Northern Development — to create a special lien to help municipalities collect unpaid property taxes from oil and gas companies.

The Wallace–Woodworth resolution was co-sponsored by the municipalities of Pipestone, Deloraine–Winchester, Two Borders, North Cypress–Langford, Ellice Archie and Prairie View.

The resolution pointed to Alberta as an example of a possible remedy. There, Bill 77, The Municipal Government (Restoring Tax Accountability) Amendment Act, was proclaimed last December with the goal to “strengthen municipal budgets by restoring a special lien giving municipalities priority to collect unpaid property taxes from oil and gas companies.”

“Similar reforms on provincial legislation needs to be passed in order to protect the interest of the public and for municipalities to continue delivering programs and services with improved protection from negligent oil and gas companies,” the Manitoba resolution stated.

According to the government of Alberta, municipalities there had found themselves in the same situation as their Manitoba counterparts. In 2019, the Alberta Court of Appeal ruled that existing liens didn’t legally apply to linear property such as wells and pipelines. As a result, there was no effective legal mechanism for municipalities to collect unpaid taxes on oil and gas properties such as wells. A survey conducted in 2021 by the Rural Municipalities of Alberta found $245 million in unpaid property taxes was owed to its members.

Bill 77 restored a special lien municipalities can use to require oil and gas companies to pay overdue property taxes. Under that lien, both the owner and operator of the company are liable for unpaid taxes, and it gives municipalities priority over other creditors whether the oil and gas company is operating or bankrupt. Companies have 120 days to pay or arrange a payback deal before the municipality can seize property.

While no figure was available for the total amount of unpaid property taxes oil and gas companies are responsible for in Manitoba, AMM’s director of policy and communications said the organization will reach out to the various municipalities that sponsored the resolution to gather more information for its advocacy efforts.

Meanwhile, other municipalities agree the uncollected taxes are an issue.

The Municipality of Two Borders currently has multiple oil and gas properties in arrears, said Reeve Sandra Clark.

“We are supporters of that resolution,” Clark said. “This affects our municipality as well when it comes to collecting taxes and school taxes for personal property.”

The RM of Pipestone has had a bit more luck, though. Reeve Archie McPherson said his community had a couple of smaller oil and gas properties that were in arrears a few years ago during the oil slump, but other companies took over the leases and the municipality was able to negotiate payment of back taxes.

“We’ve had some in the past, yes. [We’ve] been able to work through it and collect it, but sometimes there’s several thousand dollars sitting on the books that we’re not able to collect.”

Still, he believes it’s a widespread issue.

“I think it’s a problem, probably, in Western Canada over the past several years,” McPherson said. “Alberta was one of the first to instigate something to try to alleviate the problem or minimize it.

Legislation amendments like those passed in Alberta would give municipalities more tools to work with, McPherson added.

Canart said there are a number of mechanisms that could be introduced to help municipalities get their money, including property seizure as a last result. However, he said a lien or a means to bump municipalities toward the top of the list of parties entitled to compensation if an oil and gas company with unpaid taxes goes into receivership would be key.

He estimated that last year Wallace–Woodworth was owed hundreds of thousands of dollars, but fortunately another company took over the site from the company in receivership and paid the taxes owing.

» ihitchen@brandonsun.com